VER, ROGER KEITH v. OKEX FINTECH CO LTD (formerly known as KIND CASTLE TRADING LTD) AND ANOTHER

HCA 2439/2016

[2020] HKCFI 2335

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2439 OF 2016

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DECISION

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1.  This is an application by summons dated 28 May 2020 by OKEX Fintech Co. Ltd (“D1”) and Xu Mingxing (“D2”) (collectively “the defendants”) for leave to appeal the Decision dated 14 May 2020 (“the Decision”) whereby the defendants’ appeal from the order dated 19 November 2018 of Master Suen was dismissed. It was ordered, inter alia, that (1) the ex parte order dated 9 August 2017 (granting Ver, Roger Keith (“the plaintiff”) leave to serve a concurrent writ out of the jurisdiction on D2) be set aside, but that (2) leave be granted to the plaintiff to serve the concurrent writ on D2 out of the jurisdiction pursuant to Oder 11, rule 1(1)(c) and (d)(iii). My decision appears below.

2.  Reference should be made to the Decision for the background facts and the reasons for the order made.

3.  The applicable legal test for leave to appeal is not controversial. The parties are agreed that the relevant test for granting leave is that set out in SMSE v KL [2009] 4 HKLRD 125 at §17.

The defendants’ grounds of appeal

4.  The draft notice of appeal (the “NoA”) annexed to the summons for leave set out various grounds which can conveniently be considered under the following sub-headings.

NoA §1: the “Fraud” plea

5.  The defendants submit that the fraud claim pleaded in the RASOC §§12-14 is one for the tort of deceit which cannot possibly succeed because of the absence of reliance on the misrepresentation and the fact that no damage was pleaded. The 1^st ground of appeal is the alleged failure of the court to take into account those deficiencies in the plea of deceit.

6.  RASOC §§12-14 concern not only the critical difference between the Version 8 Agreement (which was emailed to the plaintiff by D2 on 20 May 2015) and the Agreement and the claim of D1and/or D2 that Version 8 was a later version of the Agreement but also the plaintiff’s case challenging the authenticity of Version 8, the plaintiff’s case being that the signature thereon is a forgery.

7.  Those facts are material and relevant to the plaintiff’s claim for declaratory relief: see the prayer for relief at (4).

8.  The defendants’ criticism, seen through the lens of the tort of deceit appears to be misplaced: there is no application for leave to serve out under O 11, r 1(1)(f) (the tort gateway). The declaratory relief claimed is a claim brought in respect of a contract which is by its terms, or by implication, governed by Hong Kong law within O 11, r1(1)(d)(iii).

9.  Accordingly, I do not consider this to be a valid ground of appeal. 

NoA §§2 and 3: No Lis

10.  The defendants’ challenge hinges on whether as at the date of the Decision, there was a live issue between the plaintiff and D1 as to whether the Agreement had been superseded by Version 8 (“the Version 8 defence”).

11.  As explained in §62 of the Decision, in its setting aside application, one of the defences D1 raised was that the Agreement had been superseded by Version 8, the resolution of which required the prior resolution of the forgery issue.

12.  Based on the matters and events set out in §§2-22 of the Decision, the Court held that

(a)  on 9 August 2017 (the date of the ex parte order) there was no live lis between the plaintiff and D1 (the anchor defendant) by reason of the 2016 Order granting summary judgment then remaining extant;

(b)  upon the grant of conditional leave to defend on 25 October 2017 or, at the latest, when such leave was rendered unconditional on 30 October 2017, the lis between the plaintiff and D1 revived[1];

(c)  such lis was subsisting on 25 April 2018 when the defendants made the application culminating in the Decision when leave for service out was re-granted.

13.  The defendants challenge the correctness of (c) above on the bases considered below.

(i) NoA §§4and 6: D1’s pleaded case

14.  The defendants’ submission is that because D1’s Amended Defence and Counterclaim filed on 7 August 2018 (the “AD&CC”) made no mention of the Version 8 defence and did not plead a positive case regarding the Version 8 Agreement, the Version 8 defence ceased to be a defence or part of D1’s case thereafter. This was considered and rejected: see §§63 – 64 and 66 – 70 of the Decision.  

15.  They now also rely on the fact that D1’s counterclaim is based on the Agreement as binding with no alternative case on Version 8 superseding the Agreement.

16.  The pleas in RASOC §§12-14 are met with an express non-admission (AD&CC §13). As a traverse may be made by a statement of non-admission, the effect of AD&CC §13 is to require the plaintiff to prove all the allegations it made in RASOC §§12-14, specifically that there was no subsequent agreement to the Agreement. That necessarily involves disproving the Version 8 Agreement, irrespective of the basis of D1’s counterclaim.

(ii) NoA §6: Abandonment, orally and in writing

17.  §§71-72 of the Decision record the development in the defendants’ stance that emerged as the hearing was about to conclude. As the plaintiff’s case as to the relevance of Version 8 Agreement has been consistent throughout, one might ask rhetorically why the proposed undertaking to ‘abandon’ the Version 8 defence did not feature earlier but only in the course of oral reply submissions at the hearing on 4 May 2020. 

18.  It is to be noted that Version 8 was a defence on which D1 relied to set aside the default judgment in October 2017. Despite the fact that ex parte leave to serve D2 outside the jurisdiction was granted on 9 August 2017, D1 re-affirmed its reliance on the Version 8 defence: see the further affirmation filed on its behalf on 16 August 2017.

19.  The defendants’ application, inter alia, to set aside ex parte leave obtained on 9 August 2017 was dismissed in November 2018.  While the notice of appeal was filed on 3 December 2018, the hearing did not take place until May 2020, some 17 months later.

20.  Having relied on the Version 8 defence to set aside the 2016 Order, for the purpose of assisting D2 to set aside leave to serve out, D1 now suggests that it never relied and will not rely on the Version 8 defence. The plaintiff, not without reason, considers that the defendants’ approach “opportunistic”, and that in reality they have been attempting to keep the Version 8 defence open to them from the outset.[2]

21.  As the last-minute proposal to undertake to abandon reliance on the Version 8 defence was a rearguard action in an attempt to stave off a likely outcome of the hearing, fairness to the plaintiff required that it be reduced to writing for proper consideration. The parties were directed to submit an agreed form of undertaking for the Court’s approval.

22.  On 8 May 2020 the court was informed that the defendants had submitted the following form of undertaking to be given by the defendants but which was not acceptable to the plaintiff:

“The 1^st and 2^nd Defendants undertake and confirm that, for the avoidance of doubt, neither the 1^st Defendant north the 2^nd Defendant is alleging or intends to allege that the Version 8 Agreement (as defined in paragraph 12 of the [RASOC]) superseded amended Agreement (as defined in paragraph 7 of the [RASOC]).”

23.  The court agreed with the plaintiff’s reasons for rejecting the undertaking: see §75 of the Decision. This ground of appeal challenges that conclusion on the basis that the undertaking offered constitutes a written admission having the force of pleadings and binding on the defendants within Order 27, rules 1-3.

24.  I am unable to discern from the undertaking a written admission “of the truth or the whole or any part of the case of any other party”. It is a statement of what the defendants are or are not alleging and of their current intention. It does not eliminate the need for the plaintiff to prove its allegations made in RASOC §§13-14.

25.  In my view, none of (i) to (iii) above is arguable.

NoA §§5 and 7: D2 as a “necessary or proper party”

26.  The defendants accept that for a person to be a “necessary and proper party” within O11 1(1)(c), the plaintiff does not need to have a cause of action against that person (D2 in the present case): The Hong Kong Housing Authority v Hsin Yieh Architects & Associates Ltd & Ors [2006] 1 HKLRD 316 at §18.

27.  The determination of the contractual claim against D1 necessarily involves an enquiry as to whether the signature on the Version 8 Agreement is a forgery, and if so, whether one and/or both of the defendants is responsible.

28.  Plainly, D2 is thus a person “whose presence before the Court is necessary to ensure that all matters in dispute in the cause or matter may be effectually and completely determined and adjudicated upon”: Order 15, rule 6 (2)(b)(i).

29.  For the purposes of Order 15, rule 6(2)(b), a person need not satisfy both subparagraphs (i) and (ii). It suffices if only one of those subparagraphs is applicable.

NoA §8: “No real interest”

30.  The defendants contend that contrary to §75 of the Decision, the determination of the Version 8 defence will not affect D2’s position and interests in that as a director and shareholder of D1, he had only a reflective interest in those proceedings.

31.  Further, it is also the defendants’ contention that D2 is not “a proper contradictor” (see Koo Ming Kown v Mok Kong Ting & Ors [2018] HKCFI 967 at §14) and that the plaintiff has no locus to prosecute any criminal liability following a finding that the Version 8 Agreement produced by D2 is a forgery.

32.  Koo Ming Kown adopted the principle derived from the following passage from Lord Dunedin’s speech in Russian and Industrial Bank v British Bank for Foreign Trade Limited[3]:

“… The question must be a real and not a theoretical question; the person raising it must have a real interest to raise; he must be able to secure a proper contradictor, that is to say, someone presently existing who has a true interest to oppose the declaration sought.”

33.  Applying those principles, the plaintiff clearly has a real interest in seeking a declaration against D2 and D2 has a true interest in opposing it, given that at the very least, it would enable the plaintiff to seek damages (if not also exemplary damages).

Conclusion

34.  In my view, none of the grounds put forward is arguable. Accordingly, leave to appeal is refused and the defendants’ summons dismissed with costs to the plaintiff, such costs to be summarily assessed and payable forthwith.

35.  As the plaintiff has submitted its statement of costs, the defendants are directed to submit any objections in writing within 7 days of this Decision.